Foreign Policy In Focus | 12 August 2015
Where the TPP could lose
After years of secret negotiations and silence in the media, the Trans Pacific Partnership (TPP) has risen to headline news. Now that Congress has voted to give President Obama “fast-track” trade promotion authority to push the deal through the House and Senate with limited debate and no amendments, efforts to finalize the agreement among member countries are proceeding in earnest.
But even if negotiators can reach a final accord, which is far from certain, the pact must still be approved by other national legislatures. And here, the United States is not the only country we should be watching. In Chile, where the administration of President Michelle Bachelet has moved forward with the TPP negotiation process, opposition is strong in the legislature. Even Bachelet’s minister of foreign affairs has indicated that Chile won’t sign the agreement if the TPP doesn’t meet certain criteria.
The Chilean controversy over the TPP highlights some of the biggest problems with the agreement — for working people in Chile, the United States, and around the world — and it makes plain the false promises the Obama administration used to push Democrats to support fast track.
That a no vote from Chile might unravel the agreement as a whole — or inspire other legislatures to follow suit — may be wishful thinking. But growing opposition in that country is a reminder of what’s at stake and why it’s so important for national legislators — in the United States and abroad — to take a stand against bad trade deals. And it highlights the power that organized citizens have to hold politicians accountable and make the TPP vulnerable.
The TPP would unite 12 Pacific Rim countries — Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam — in an agreement so big it would account for 40 percent of the global economy. The deal extends far beyond conventional areas of trade policy to encompass issues normally decided by national legislatures, such as intellectual property rights and access to affordable prescription drugs.
And it would be a landslide victory for large corporations.
Transnational corporations in the pharmaceutical, entertainment, and banking industries, among others, are shaping rules that apply to copyrights, medicinal patents, food labeling, and financial regulation. Over 600 advisers, mainly from corporations, have direct access to the text — unlike national legislatures and civil society organizations around the world, from whom the document has been kept secret. What information is known publicly has largely come from leaks.
If their influence over the scope of the treaty weren’t enough, the TPP has provisions that allow corporations to sue national governments in unaccountable tribunals if a regulation passed after the treaty goes into effect cuts into their future profits. In many cases these “investor-state dispute settlement” (ISDS) mechanisms are enough to prevent countries from passing such regulations in the first place.
Under ordinary circumstances, signing on to a free trade agreement would be a no brainer for Chile. It has agreements with more countries than any other nation, and additional ones are on the way. In fact, Chile already has trade agreements with all the other countries involved in the TPP.
And yet this specific agreement is raising alarm in Chile.
Many of the concerns — concerning ISDS and the secrecy of the text — are shared across countries, with critics organized into international and regional networks. But what’s interesting to note is the different foci of criticisms in the United States and elsewhere. While the U.S. Congress highlighted issues such as currency manipulation and potential job loss as its members deliberated about whether to approve fast track, Chilean organizations have pointed to a set of issues that affect everyone, and yet have an especially hard impact on countries outside the United States, especially developing countries.
A primary concern is the dominance of U.S. corporate interests. Although the agreement is billed as a trade pact among 12 nations, in reality the United States and its large corporations play a primary role.
As Marcela Ortiz from the Santiago office of Consumers International points out, as a condition for each country signing on to the pact, the United States can require changes in any one of the participating countries’ laws. Through the process called legislative certification, explains an anti-TPP group’s website, “U.S. officials can define another country’s obligations; become directly involved in drafting that country’s relevant law and regulations; demand to review and approve proposed laws before they are presented to the other country’s legislature; and delay certification until the U.S. is satisfied the new laws meet its requirements.” This is a direct assault on representative democracy, one to which a number of TPP countries have explicitly objected.
And the text of the treaty can override national law. For example, in 2010, Chile went through an extensive process of public consultation and congressional debate, which eventually resulted in its 2010 intellectual property law. Provisions in the TPP, an agreement written in secret by non-elected authors, would supersede aspects of that law, which had been created through a participatory democratic process.
A Chilling Effect
The TPP not only challenges prior laws. It impedes countries’ abilities to set future policy.
For instance, provisions under consideration limit the functioning of state-owned companies. That could deter a country like Chile from creating government-run businesses in areas such as clean energy, health, development banking, and pensions. It would also limit regulation of genetically modified ingredients, additives, and pesticides in food products. A recent report by the U.S. Trade Representative — the very office representing the United States in TPP negotiations — shows that it classifies many policies that member countries are trying to institute at home to protect the public interest as “barriers to trade.”
Of particular concern in Latin America is the ability to regulate the flow of capital.
It’s widely acknowledged that deregulation of the banking sector in the United States and Europe contributed to the international financial crisis of 2008. “In contrast,” Carlos Furche, a former Chilean trade official, wrote in 2013, “regulations in emerging countries, such as Chile, have allowed them to stay out of the financial crisis.” Given that, he continued, “it is not reasonable or acceptable to allow for amendments” aimed at “further liberalizing capital flow control, as it seems to be the intention of the U.S. negotiators.”
In its own free trade deal with the United States, Furche continued, “Chile managed to retain powers of its Central Bank” that enable it to “regulate the entry and exit of capital in situations of crisis in the balance of payments.” Agreeing to more lax standards for the flow of capital under TPP could have potentially devastating consequences for the future. This is one area in which Chile has aimed to make progress in negotiations.
The treaty also potentially affects Chile’s international relations. In making the case domestically for the TPP, the Obama administration has framed the agreement as a way to counter China’s influence in Asia. Yet China is already Chile’s largest trading partner. Moreover, other neighboring countries in Latin America are involved in trade blocs — the BRICS (Brazil, Russia, India, China and South Africa), for example — that are intended to counterbalance U.S. and European global economic predominance. Not only does Chile not have a direct stake in advancing U.S. foreign policy goals, but doing so might cause tensions with some of its regional allies in Latin America.
Rewriting the Rules
Chileans have joined others in objecting to the curtailing of rights and social benefits in three other major areas: health, culture, and the Internet.
As critics in many countries agree, the TPP is expected to harm health by extending the duration of patents for medicines and medical procedures, making them unaffordable for millions of people and increasing the cost of implementing public health measures. The TPP is predicted to limit culture and education by increasing the time before movies, music, and books enter the public domain — thereby keeping the price too high for low-income people as well as schools and libraries. And the TPP could curtail Internet freedoms by impeding innovation and criminalizing popular forms of sharing. All of these, which could impact people in the United States as well, hit other countries especially hard.
What’s particularly thorny for Chile is that standards for these issues were already hammered out in bilateral agreements with the United States and other countries. The concern is that joining the TPP will be tantamount to renegotiating the terms of trade — and coming out with less favorable results than before.
Taking a Stand
Opposition in Chile first began to grow during the presidency of Sebastián Piñera, Bachelet’s right-wing predecessor.
At that time, major figures in the country’s trade sector voiced intense skepticism of the TPP. They were joined by 34 congressional representatives and 15 senators, who in concert with civic leaders submitted a declaration to the government demanding that the TPP be opened to public scrutiny and debate.
They echoed a host of civil society organizations, including Derechos Digitales and Consumers International, who — along with international allies and regional counterparts — launched forceful critiques of the deal. The outcry among lawmakers extended internationally, with representatives launching the site “TPP Legislators for Transparency“ to rally critics of the deal across borders.
Bringing their resistance to art, Chilean organizations invited hip hop artist Ana Tijoux to create a song about the TPP. Her 2013 music video “No to the TPP“ shows photos of protests around the world. The lyrics say, in part,
Tell me, tell me who is the thief
If you steal everything out of control …
A treaty is not democratic if it is made behind the people
And your deal is not a deal if it is made secretly and without consensus …
Who is behind the darkness and who benefits?
Large multinational companies full of greed
We all have the right and we all want to decide
The future and present of our children and how they want to live
Glimmers of Hope
Michelle Bachelet incorporated many of these political, civic, and cultural concerns about the TPP into her 2013 presidential campaign. She wrote in her political program that it was time to slow down the TPP process, conduct an “exhaustive” review of the treaty to examine the impacts it might have on Chile, and make sure that joining the TPP didn’t amount to losing gains Chile had already secured in its trade deal with the United States.
On becoming president in 2014, Bachelet established a cuarto adjunto — a “room next door” — to share select information and conduct discussions with businesses and non-governmental organizations. And she aimed to influence the TPP’s provisions during negotiations.
Although the cuarto adjunto increased the flow of information about the negotiation process and created additional space for organizations to express their concerns, it didn’t change the underlying problem: The text remained unavailable for public view, and civil society groups have not been part of the decision-making process. In the words of Claudio Ruiz, executive director of Derechos Digitales, “Has the cuarto adjunto served to decelerate the negotiation? Has the cuarto adjunto been useful in making an exhaustive review of the benefits of the treaty for Chile? Substantively, has anything in the scenario changed de fondo in these months? The answer to all of these questions is a resounding no.”
Meanwhile, many of the provisions in the TPP would actually undercut other policy goals of Bachelet’s progressive government. These include her plan to make medicine more affordable and available, her proposals for making art and culture accessible through school and public libraries, and her promise to promote greater protection of the environment. More broadly, the pact puts a damper on any effort to create public policy, since any change can be subject to restriction and challenge under the rules of the TPP.
Leverage in Congress?
The fact that Chile already has free trade agreements with all the other countries in the pact means it has no particularly strong incentive to sign on. Unlike countries such as Malaysia and Vietnam, whose access to investment and export markets are likely to increase substantially under the TPP, the agreement won’t bring major trade benefits to Chile. Meanwhile, the costs to the country — in terms of its own ability to create laws in the future and extensions of intellectual property protections — could be high.
As the negotiation process nears a close, congressional representatives in Chile have renewed their opposition. On May 19, the Chilean House of Deputies held a special session regarding the TPP. Four deputies wore t-shirts bearing the words #NoTPP and yet more voiced their disagreement with the pact. In the words of former student leader and current deputy Camila Vallejo, “I raise my voice making a formal request to President Bachelet that she make use of her leadership and stop the private negotiations of the TPP, begun under the previous government. We do not want more submitting of our people to international corporate interest. We demand sovereignty and emancipation for the people of Chile.”
Some deputies put forward a proposal that would require the president to demonstrate that signing on to the TPP would bring concrete economic benefits to Chile. This did not pass.
However, Minister of Foreign Affairs Heraldo Muñoz made declarations about how far the Bachelet government was — and was not — willing to go. In response to deputies’ concerns, he declared that in the area of intellectual property, patents, and services, Chile would not accept any terms worse than those already negotiated in its existing free trade agreements. Specifically, in relation to patent protection for pharmaceuticals, he said that Chile would insist on the five years allowed for in existing treaties and not agree to the 12 years proposed for the TPP. “If there isn’t an agreement that’s acceptable, we won’t sign it,” he declared. Moreover, with regard to the U.S. certification process, he affirmed, “we will not accept any interference in our sovereignty, and if that were the case, the agreement would not go into effect.”
In Washington, DC on July 17, Muñoz expressed these concerns directly to U.S. Vice President Joe Biden and U.S. Trade Representative Michael Froman. And he indicated at a press conference that although Chile will “continue negotiating constructively… we don’t want TPP at any cost.”
These were strong declarations. They mean that, even while moving ahead with negotiations, the Chilean government is standing firm on certain provisions that still have not been resolved to its satisfaction.
Like their Chilean counterparts members of the U.S. Congress — particularly Democrats — face a fundamental choice between the interests of their constituents, who would lose out in the TPP, and the pressure they’re getting to go along with “free trade.” That’s what makes citizen pressure to defeat this legislation so important. Legislators — in the United States and abroad — need to use the power they still have to vote no on this treaty.
If members of Congress don’t do that now, down the road they’ll find they don’t have much power at all.